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Law Firms, Vultures, Saviors

Posted by Vivia Chen

We're not sure who came up with the idea, but law firms have now morphed from facilitators of wealth into grief counselors for the financially stricken or confused. Overnight, it seems, firms are handing out handkerchiefs and setting up virtual information booths to help clients track the latest developments on the financial crisis and bailout.

Akin Gump, Bracewell & Giuliani, Fried Frank, Gibson Dunn & Crutcher, Katten Muchin, K&L Gates, Susman Godfrey, and Squire Sanders are just some of the law firms that have formed "crisis centers" or "task forces" to respond to the financial crisis and what it has wrought--"upheaval," "a dramatic reconfiguration of the market", a "crisis in confidence." Two that we know of--Fried Frank and Paul Hastings--are marking the launch of their groups today with planned roundtable "briefings." And all these firms have teams of corporate, regulatory, litigation,
criminal, and governmental lawyers standing by to answer client calls.

Are clients calling? Well, it's a bit early to tell--though the firms are hopeful that some handholding and lots of unsolicited e-mails will blossom into paying matters. "There will be frenetic activity; and there will be investigations and litigations," predicts Bruce McLean, head of Akin Gump. He adds that some of the firm’s investment fund clients already have expressed interest in acquiring or managing assets in the bailout.

It's probably no accident that the firms brandishing their crisis units are not the prime beneficiaries of the recent economic collapse. Not every firm can be so blessed as Davis Polk, Cleary Gottlieb, Sullivan & Cromwell, or Weil Gotshal & Manges to have a starring role in the financial catastrophe. What's a mere mortal firm to do but blow its own horn and make a play for a piece of the action, right?

But the New York Daily Newshas taken one firm to task for doing just this. The tabloid painted a less than pretty picture of Bracewell & Giuliani's business strategy in a September 26 article titled "Rudy Giuliani's 'crass opportunism' reflects on Mac: Dems." "Rudy Giuliani is positioning his law firm to cash in on Wall Street's train wreck," the article starts. Moreover, the DailyNews labeled Giuliani a "prime surrogate for Republican McCain, who has called the economic meltdown 'the greatest crisis since the end of World War II.'"

The criticism doesn't bother Patrick Oxford, the firm's sonorous sounding chairman. The Houston-based lawyer says he's proud that "Rudy has been very heavily involved in helping us focus on the way government works" and knows a lot of the key players in the bailout, including treasury secretary Henry Paulson. Giuliani is a target, Oxford says, because "he's a spokesperson for McCain." It's only natural to deploy the former New York City mayor to get business now he says, because "Rudy is first and last a great lawyer."

We checked in with NYU law professor Stephen Gillers on whether there's an ethics question to consider in Bracwell & Giuliani's business development. As Gillers sees it, Giuliani's mandate is to go out there and get business. "That's his job; that's why the firm brought him in." The potential
ethical problem lies with McCain, Gillers says, "if he's getting advice from someone
with a vested interest."

As for what the future holds, Oxford sees nothing morbid about law practice in the post-financial disaster era. "There will be a tectonic shift [in the financial sector]; we will see a regulatory tsunami," he predicts. Will firms learn to play vulture to survive? Not in Oxford’s view. "It's more like a birth rather than death," he says.